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dress a potential market of roughly two-thirds of
broadband access subscribers. Moviesystem was
also able to provide its distributors with a com-
plete and customised solution. Moviesystem was
in charge of the updated provision of movies, the
analysis of customers' data, the customisation of
the user interface, and the management of digital
rights whereas distributors were responsible for
providing the adequate infrastructure, including
servers located near end-users and for billing
users. The revenues were split as follows: rights
owners got 50% of revenues, an average of 5%
was spent for the billing platform used and the
remaining 45% was more or less equally shared
between Moviesystem and ISPs.
The initial success of Moviesystem is repre-
sentative of the first phase of convergence, during
which the capabilities of players were significantly
constrained by their past experience. Moviesystem
has been able to bridge two different industries by
significantly reducing transaction costs resulting
from strong uncertainties and from information
asymmetries (Daidj et al., 2004). On the one hand,
firms in the media industry traditionally distributed
their films via movie theatres, TV channels or video
rental outlets. They were therefore not familiar
with dealing interactively with end customers,
such as analysing their behaviour and prefer-
ences and managing direct or indirect transactions
with them. They were also not accustomed to the
technical and management aspects of computing
and communications systems. ISPs and network
operators, on the other hand, lacked experience in
managing a catalogue of films. It requires artistic
and marketing capabilities, such as the ability
to assess the commercial value of films on this
complementary market, to package them, and to
put them together to provide an attractive offer.
However, the launch of triple-play services has
triggered a second phase of convergence, marked
by the emergence of competitive convergence.
The Critical Event: The
Launch of Triple-Play Offers
on the French Market
Triple play services have been increasingly
popular in France due to the initiative taken by
the ISP “Free” (Iliad Group) to launch the first
triple-play offer in Winter 2003, including ADSL2
Broadband Internet, several IPTV channels, and
free telephone calls to fixed subscribers (now to
70 countries), for a monthly subscription of 29.90
Euro 3 . Free was subsequently imitated by the other
ADSL services providers proposing similar offers.
The high level of competition and innovation in
the French market has resulted in strong growth,
leading to a penetration rate exceeding 50% of
TV households since 2006, and reaching a total
of 15.55 million subscribers at the end of 2007; a
market which is largely dominated by ADSL based
broadband services (Table 3) 4 . With 4.1 million
IPTV subscribers, the French market exhibits the
highest number of subscribers in Europe (NPA
Conseil, 2006, 2008).
The IPTV Period: Market Change and
Strategic Issues
The launch of IPTV systems and the high market
growth resulting from the provision of inexpen-
sive triple-play services have induced significant
Table 3. Broadband Internet subscribers in France ( Source ARCEP (2008))
Subscribers (mil-
lion)
2000
2001
2002
2003
2004
2005
2006
2007
Broadband
Internet
0.196
0.602
1.655
3.569
6.561
9.471
12.695
15.550
ADSL
0.068
0.408
1.368
3.172
6.103
8.902
12.019
14.800
 
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